10-Q 1 c73073qe10vq.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter ended September 30, 2002 Commission file number 33-24537 CENTURY PACIFIC TAX CREDIT HOUSING FUND II (Exact name of registrant as specified in its charter) CALIFORNIA 95-4178283 (State of other jurisdiction of (IRS Employer incorporation of organization) Identification Number) 1925 Century Park East, Suite 1900 Los Angeles, CA 90067 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (800) 262-8242 No Change (Former name, former address and former fiscal year if changed since last report) Indicate by a check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] 1 CENTURY PACIFIC TAX CREDIT HOUSING FUND II TABLE OF CONTENTS

Page PART I FINANCIAL INFORMATION Item 1 ~~FINANCIAL~~Financial ~~STATEMENTS~~Statements ~~AND~~and ~~SUPPLEMENTARY~~Supplementary ~~DATA~~Data . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Item 2 Management's Discussion and Analysis Of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . 10 Item 3 Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . 12 Item 4 Controls and Procedures . . . . . . . . . . . . . . . . . 12 PART II OTHER INFORMATION Item 16 ~~EXHIBITS~~Exhibits a.and ~~WRITTEN~~Reports ~~STATEMENT~~on OFForm ~~CHIEF~~8-K. ~~EXECUTIVE~~. ~~OFFICER~~. ~~(Exhibit~~. 99.1) b. ~~WRITTEN~~. ~~STATEMENT~~. OF. ~~CHIEF~~. ~~FINANCIAL~~. ~~OFFICER~~. ~~(Exhibit 99~~.2) 12 SIGNATURE CERTIFICATIONS EXHIBITS

2 PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS CENTURY PACIFIC TAX CREDIT HOUSING FUND II BALANCE SHEET (Unaudited)

~~June~~September 30, March 31, 2002 2002 ------------ ----------- ASSETS Cash $0 $47 Advance to General Partners 871 871 Investments in Limited ~~Partnerships~~Part- nerships (Note 4) 0 0 ----------- ----------- $871 $918 =========== =========== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) Accounts Payable and Accrued Expenses $2,500 $4,171 Amounts Payable to Related Parties (Note 3) 2,~~074~~083,~~219~~619 2,063,149 Advance from Affiliates 40,594 40,594 ----------- ----------- 2,~~117~~126,~~313~~713 2,107,914 ----------- ----------- Commitments and Contingencies Partners' Equity, (Deficit),per accompanying statement General Partners (70,~~218~~312) (70,124) Limited Partners,$1,000 stated value per unit, 25,000 units authorized, 5,754 units issued and outstanding (2,~~046~~055,~~224~~530) (2,036,872) ----------- ----------- (2,~~116~~125,~~442~~842) (2,106,996) ----------- ----------- $871 $918 =========== ===========

The accompanying notes are an integral part of this statement. 3 CENTURY PACIFIC TAX CREDIT HOUSING FUND II STATEMENT OF OPERATIONS (Unaudited)

Three Months Ended ~~June~~Six Months Ended September 30, September 30, ------------------- ------------------- 2002 2001 2002 2001 ------ ------- ------- ------- REVENUES: Other income $0 $0 $0 $0 ------ ------ ------ ------ 0 0 0 0 ------ ------ ------ ------ EXPENSES: General & Adm. (Note 3) 9,~~446~~400 9,~~429~~481 18,846 18,910 Equity in Net Losses of Operating Partnership (Note 4) 0 0 0 0 ------ ------ ------ ------ 9,~~446~~400 9,~~429~~481 18,846 18,910 ------ ------ ------ ------ Net Loss $(9,~~446~~400) $(9,~~429~~481)$ (18,846) $(18,910) ====== ====== ====== ====== Allocation of net Loss General Partners $(94) $(95) $(188) $(189) Limited Partners (9,306) (9,386) (18,658) (18,721) ------ ------ ------ ------ $(9,400) $(9,481) $(18,846 $(18,910) ====== ====== ====== ====== Net Loss Per Unit of Limited Partnership Interest $2 $2 $3 $3 ====== ====== ====== ====== Average Number of Units Outstanding 5,754 5,754 5,754 5,754 ====== ====== ====== ======

The accompanying notes are an integral part of this statement. 4 CENTURY PACIFIC TAX CREDIT HOUSING FUND II STATEMENT OF PARTNERS' EQUITY (DEFICIT) September 30, 2002 (Unaudited)

General Limited Partners Partners Total ----------- ----------- ----------- Balance at March 31, 2002 ($(70,124) ($(2,036,872) ($(2,106,996) Net ~~Income (~~Loss) (94188) (918,~~352~~658) (918,~~446~~846) ----------- ----------- ----------- Equity (Deficit) at ~~June~~September 30, 2002 ($(70,~~218~~312) ($(2,~~046~~055,~~224~~530) ($(2,~~116~~125,~~442~~842) =========== =========== =========== Percentage Interest ~~June~~September 30, 2002 1% 99% 100% =========== =========== ===========

The accompanying notes are an integral part of this statement. 5 CENTURY PACIFIC TAX CREDIT HOUSING FUND II STATEMENT OF CASH FLOWS (Unaudited)

~~Three~~Six Months Ended ~~June~~September 30, ---------------------- 2002 2001 -------- -------- Cash Flow from Operating Activities: ~~General~~Transfer ~~and~~Fee ~~Admin.~~Income ~~Expenses~~Received $ 0 $ 0 General and Administrative (918,~~446~~846) $(918,~~429~~910) ~~Decrease~~Incr (Decr) in ~~Accounts~~Accts Payable (1,671) (12,~~300~~312) -------- -------- Net Cash Used in Operating Activities: $(1120,~~117~~517) $(1021,~~729~~222) ======== ======== Cash Flow from Financing Activities: Increase (Decrease) in Amounts Payable to Related Parties $11 20,~~070~~470 $9 18,~~400~~800 -------- -------- Net Cash Provided By Financing Activities $11 20,~~070~~470 $9 18,~~400~~800 ======== ======== Net Increase (Decrease) in Cash and Cash Equivalents ($ (47) ($1 (2,~~329~~422) Cash and Cash Equivalents at Beginning of Period 47 2,562 -------- -------- Cash and Cash Equivalents at End of Period $ 0 $~~1,233~~ 140 ======== ========

The accompanying notes are an integral part of this statement. 6 CENTURY PACIFIC TAX CREDIT HOUSING FUND II a California limited partnership NOTES TO FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF THE PARTNERSHIP AND ITS ORGANIZATION: Century Pacific Tax Credit Housing Fund II, a California limited partnership (the "Partnership" or "CPTCHF II") was formed on September 2, 1988 for the purpose of raising capital and selling limited partnership interests and then acquiring limited partnership interests in partnerships (the "Operating Partnerships") owning and operating existing residential apartment properties (the "Properties"). The general partners of the Partnership are Century Pacific Capital II Corporation, a California corporation, ("CPII") and Irwin Jay Deutch, an individual (collectively, the "General Partners"). The General Partners and affiliates of the General Partners (the "General Partners and Affiliates") have interest in the Partnership and receive compensation from the Partnership and the Operating Partnerships (Note 3). The Properties qualify for the "Low-Income Housing Tax Credit" established by Section 42 of the Tax Reform Act of 1986 (the "Low-Income Housing Tax Credit"). These properties are leveraged low-income multifamily residential complexes and some receive one or more forms of assistance from federal, state or local governments, or agencies (the "Government Agencies") while others do not receive any subsidy from Government Agencies although some may have mortgage loans insured by a Government Agency. In September 1988, the Partnership began raising capital from sales of limited partnership interests, at $1,000 per unit. The limited partnership offering closed as of December 31, 1989, with 5,754 units having been sold. As of September 30, 2002, the Partnership has acquired limited partnership interest of 90% in Washington Courts Limited Partnership and 60% in Laurel-Clayton Limited Partnership, two existing Operating Partnerships which own apartment rental properties. Basis of Presentation The accompanying unaudited financial statements of Century Pacific Tax Credit Housing Fund II (the Company) as of September 30, 2002 and March 31, 2002 (the March 31, 2002 financial information included herein has been extracted from the Companys audited financial statements on Form 10-K) and for the three and six months ended September 30, 2002 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934. Accordingly, they do not include all of the information 7 and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Partnerships management, all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial statements have been made. The statement of operations for the three and six months ended September 30,2002 are not necessarily indicative of the results that may be expected for the entire year. These statements should be read in conjunction with the financial statements and related notes thereto included on Form 10-K for the year ended March 31, 2002. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Method of Accounting for Investments in Operating Partnerships The Partnership uses the equity method to account for its investment in the Operating Partnerships in which it has invested (Note 4). Under the equity method of accounting, the investment is carried at cost and adjusted for the Partnership's share of the Operating Partnerships' results of operations and by cash distributions received. Equity in the loss of each Operating Partnership allocated to the Partnership is not recognized to the extent that the investment balance would become negative. Basis of Accounting The Partnership maintains its financial records on the tax basis. Memorandum entries, while not recorded in the records of the Partnership, have been made in the financial statements to reflect accounting principles generally accepted in the United States of America. On August 7, 1991, management of the Partnership changed from a calendar year end to a fiscal year end of March 31 for financial reporting purposes. Accordingly, the Partnership's quarterly periods end June 30, September 30, and December 31. The Operating Partnerships, for financial reporting purposes, have a calendar year. The Partnership, as well as the Operating Partnerships, have a calendar year for income tax purposes. Syndication Costs Public offering costs have been recorded as a direct reduction to the capital accounts of the Limited Partners. Organization, Acquisition and Other Costs Costs incurred in organizing the Partnership and expenditures made by the Partnership in connection with its acquiring limited partnership interest in Operating Partnerships are deferred and amortized over a period of sixty months on a straight-line basis 8 or capitalized as investments in Operating Partnerships. Other fees and expenses of the Partnership are recognized as expenses in the period the related services are received. Income Taxes No provision has been made for income taxes in the accompanying financial statements since such taxes and/or the recapture of the Low-Income Housing Tax Credits benefits received, if any, are the liability of the individual partners. The Partnership uses the accrual method of accounting for tax purposes. Statement of Cash Flows - Cash and Cash Equivalents For the purpose of the statement of cash flows, the Partnership considers all highly liquid instruments purchased with an original maturity date of three months or less to be cash equivalents. NOTE 3 - TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES OF THE GENERAL PARTNERS: The General Partners of the Partnership are CPII and Irwin Jay Deutch. Century Pacific Placement Corporation ("CPPC"), an affiliate of the General Partners, served as the broker-dealer- manager for sales of the limited partnership interests in the Partnership. Century Pacific Realty Corporation ("CPRC"), an affiliate of CPII, is a general partner in each of the Operating Partnerships. The General Partners have an aggregate one percent interest in the Partnership. CPRC has a one-half percent interest in each of the Operating Partnerships. The General Partners and their Affiliates receive compensation and reimbursement of expenses from the Partnership, as set forth in the limited partnership agreement, for their services in managing the Partnership and its business. Pursuant to the partnership agreement, the Partnership is required to pay CPII an annual Management Fee for its services in connection with the management affairs of the Partnership. The annual Management Fee is equal to .5% of Invested Assets (as defined by the partnership agreement). The General Partners and Affiliates also receive compensation and reimbursement of expenses from the Operating Partnerships. This compensation and reimbursement include services provided to the Partnership during its offering stage, acquisition stage and operational stage. NOTE 4 - INVESTMENTS IN OPERATING PARTNERSHIPS: The following is a summary of the Partnership's investments in Operating Partnerships: 9

~~Three~~September ~~Months Ended Jun~~ 30, ~~Year Ended 2002~~ March 31, 2002 2002 ------------- -----------~~---~~ Cash Contribution to Operating Partnerships to fund purchase of beneficial interest in Properties $ 4,536,020 $ 4,536,020 Equity in net losses of Operating Partnerships (4,536,020) (4,536,020) ----------- ----------- $ 0 $ 0 =========== ===========

The Properties in which the Operating Partnerships hold beneficial interests are as follows:

The following combined statement of operations is prepared on the accrual basis and summarizes the operations of the Operating Partnerships for the three months ended September 30, 2002 and September 30, 2001 and for the six months ended September 30, 2002 and September 30,2001. COMBINED STATEMENT OF OPERATIONS OF PROPERTIES ACQUIRED BY THE OPERATING PARTNERSHIPS IN WHICH CENTURY PACIFIC TAX CREDIT HOUSING FUND II HAS INVESTED (Unaudited)

Three Months Ended ~~June~~Six Months Ended September 30, September 30, 2002 2001 2002 2001 ----------- ----------- ----------- ----------- REVENUES: Rental Income $ 1,~~333~~351,~~243~~242 $ 1,~~337~~329,~~337~~680 $ 2,684,485 $ 2,667,017 Other 3541,~~899~~860 2031,~~475~~589 77,759 52,064 ----------- ----------- ----------- ----------- 1,~~369~~393,~~142~~102 1,~~357~~361,~~812~~269 2,762,244 2,719,081 ----------- ----------- ----------- ----------- EXPENSES: Operating, General and Administrative 1,~~109~~034,~~856~~447 1,~~011~~113,~~394~~041 2,144,303 2,124,435 Depreciation 269,303 263,891 538,606 527,782 Interest 115,451 115,451 230,902 230,902 ----------- ----------- ----------- ----------- 1,~~494~~419,~~610~~201 1,~~390~~492,~~736~~383 2,913,811 2,883,119 ----------- ----------- ----------- ----------- Net ~~Income~~Loss $ (~~Loss~~26,099) ($~~125~~ (131,~~468~~114) $ (151,567) $32 (164,~~924~~038) =========== =========== =========== ===========

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Results of Operations PLUMLEY VILLAGE - Worcester, Massachusetts 10 Plumley Village consists of 430 units situated on approximately 16 acres of land adjacent to Downtown Worcester. There is one 16 story high-rise and three low-rise structures on the site. The property has good freeway access and is convenient to stores, churches and hospitals. The property is 98% occupied during the quarter. Cash flow was sufficient to cover operating expenses. Property rents were last increased in May 1995, bringing the annual gross potential rental revenue to approximately $4,292,000. WASHINGTON COURTS - Chicago, Illinois Washington Courts consists of 103 units on several sites in the Austin neighborhood of Chicago. The property is convenient to banks, schools, churches and commercial areas. The property averaged a 94% occupancy rate during the quarter. Cash flow was sufficient to cover operating expenses. Property rents were increased 1.0% in May 1996, increasing the annual gross potential rental revenue to approximately $1,059,000. Liquidity and Capital Resources The Partnership is currently experiencing a liquidity problem. Under the Partnership Agreement, the Partnership is entitled to receive distributions of surplus cash from the Operating Partnerships, which is to provide the funds necessary for the Partnership to meet its administrative expenses and pay the Partnership management fee. At the present time, the Operating Partnerships have not generated sufficient cash distributions to fund the Partnerships expenses. As a result of the foregoing, the Partnership has been dependent upon its affiliates and the General Partners for continued financial support to meet its expenses. Though, there can be no assurance, management believes that affiliates and/or the General Partners, though not required to do so, will continue to fund operations of the Partnership and defer receipt of payment of allocated overhead admin- istrative expenses and partnership management fees. Allocated administrative expenses paid or accrued to affiliates and the General Partners represent reimbursement of the actual cost of goods and materials used for or by the Partnership, salaries, related payroll costs and other administrative items incurred or allocated, and direct expenses incurred in rendering legal, accounting/bookkeeping, computer, printing and public relations services. Items excluded from the overhead allocation include overhead expenses of the General Partners, including rent and salaries of employees not specifically performing the services described above. Unpaid allocated administrative expenses and partnership management fees, an annual amount up to .5% of invested assets, will accrue for payment in future operating years. The Partnership is not expected to have access to any significant sources of financing. Accordingly, if unforeseen contingencies arise that cause an Operating Partnership to 11 require additional capital to sustain operations, in addition to that previously contributed by the Partnership, the source of the required capital needs may be from (i) limited reserves from the Partnership (which may include distributions received from Operating Partnerships that would otherwise be available for distribution to partners), (ii) debt financing at the Operating Partnership level (which may not be available), or (iii) additional equity contributions from the general partner of the Operating Partnerships (which may not be available). There can be no assurance that any of these sources would be readily available to provide for possible additional capital requirements, which may be necessary to sustain the operations of the Operating Partnerships. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Due to the nature of our foregoing operations, we have concluded that there is no material market risk exposure and, therefore, no quantitative tabular disclosures are required. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures The Partnerships Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effective- ness of the Partnerships disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c) as of a date within ninety days before the filing date of this quarterly report. Based on that evaluation, they have concluded that the Partnerships current disclosure controls and procedures are effective in timely providing them with material information relating to the Partnership required to be disclosed in the reports the Partnership files or submits under the Exchange Act. (b) Changes in Internal Controls There have not been any significant changes in the Partnerships internal controls or in other factors that could significantly affect these controls subsequent to November, 2002, the date of evaluation. There were no significant deficiencies or material weaknesses, and, therefore, no corrective actions were taken. PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits We have listed the exhibits by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K on the Exhibit list attached to this report. (b) Reports on Form 8-K None 12 * * * SIGNATURE * * * Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENTURY PACIFIC TAX CREDIT HOUSING FUND II a California limited partnership By: Century Pacific Capital II Corporation, a California Corporation General Partner /s/Irwin J. Deutch By: ----------------------------- Irwin J. Deutch, President * * * CERTIFICATIONS * * * I, Irwin J. Deutch, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Century Pacific Tax Credit Housing Fund II; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statement were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; 13 b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and 6.The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ Irwin J. Deutch -------------------------- Irwin J. Deutch, President, Chief Executive Officer * * * CERTIFICATIONS * * * I, Essie Safaie, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Century Pacific Tax Credit Housing Fund II; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statement were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements and other financial 14 information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and 6.The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ Essie Safaie ----------------------------- Essie Safaie, Chief Financial Officer 15 EXHIBITS

*Filed herewith 16

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